Yu Pengcheng: Cement Industry Price Falls Backward

According to the “Voice of the Economy” report of the economy, Yu Pengcheng, an analyst at Dongxing Securities’ building and building materials industry, performed a guest program to interpret investment opportunities in the building and building materials industry. Yu Pengcheng believes that the overall sales price of the cement industry is in a downward trend.

Moderator: The cement industry's cumulative revenue for the first three quarters was 574.68 billion yuan, an increase of 46.21% year-on-year; cumulative cost was 459.344 billion yuan, also an increase of 37.72% year-on-year; sales margin was 11.3%, an increase of 4.6 from the same period last year. Percentage points; accumulated profits were 26.336 billion yuan, a year-on-year increase of 146.49%. From the data point of view, the cement industry performed well in the first three quarters. What are the reasons?

Yu Pengcheng: The sales growth, revenue, and profit of listed cement companies in the third quarter were basically 30%, 50%, and 140% year-on-year. The year-on-year growth in sales revenue and profits was improved, and the growth rate was higher than the previous quarter. The main reason was that cement prices increased significantly. From July 2010, nationwide power cuts led to a rapid decline in the cement industry's capacity supply in the short-term, while the demand was relatively strong, resulting in a substantial increase in cement prices. At the beginning of 2011, cement prices fell slightly, but remained high year-on-year, resulting in a year-on-year growth in the cement industry's revenue growth rate. In the first half of this year (2011), the demand performance in the first three quarters was relatively good, and the overall output growth of the cement industry reached 19%, which should be said to be a relatively high level in history.

By analyzing the price of the main 42.5 graded cement in each provincial capital city in the country, cement prices in East China and Central China have increased substantially year-on-year, especially as Jiangxi, Jiangxi, Henan, Hubei and Wuhan have all experienced a 30% to 50% increase in cement prices. In the first half of 2010, cement companies in these provincial capitals were basically low in cement prices, and the industry was in a state of low profit. After cement prices were substantially raised, they were basically all profitable. Big, so it shows the good performance of the cement industry in the third quarter.

Moderator: The single-month profit for September was 9.066 billion yuan, down 8.18% month-on-month. Does this mean that the turning point of the industry is coming?

Yu Pengcheng: The cement industry has its own industry characteristics during the year. Basically, from the 1234 quarters, the order from the most to the largest is 4231, which means that the first quarter is the largest off-season in the whole year, and then the second quarter It is a small busy season. In the third quarter, it is an off-season ring season. The fourth quarter is the peak season for the whole year.

The first quarterly decline in profit growth in the third quarter was primarily due to seasonal factors. Second, due to the sharp rise in cement prices in the second half of last year, cement prices were basically driven by administrative interventions. Overall, the cement industry still belongs to an industry with excess capacity. Therefore, when the administrative restrictions were lifted, the overall sales price of the cement industry should be said to be in a downward trend.

Although the cement industry has witnessed some relatively different changes this year, such as on-site insured prices among regional leading enterprises, and through their own efforts to maintain market prices, prices have remained high, but overall, supply and demand are still deciding on price trends. One of the biggest factors, so from the first quarter to the third quarter, the price chain is still gradually declining.

From the data, in the central and eastern parts of the country where prices increased more than in the third quarter of this year, their cement prices fell by around 10% to 15% in the third quarter from the second quarter. Therefore, relative to the third quarter, the quarterly profit growth rate. The decline is also influenced by the price drop factor.

Moderator: From the perspective of gross profit margin, the cement industry's gross profit margin improved significantly year-on-year, and the chain ratio was a drop at a high level. However, in the third quarter of the Northeast China, the gross margin of the cement industry was a year-on-year increase or a quarter-to-quarter ratio. Is still relatively large, what is the reason?

Yu Pengcheng: The intuitive look is definitely the impact of price factors. The cement industry in Northeast China as a whole is a bright spot, and it is basically an independent market. From the first quarter to the third quarter, prices in most areas in the country are basically lower than those in the previous period. Only in the Northeast China from the beginning of the year to the third quarter are basically rapid and steady increases, and the rate of increase is also relatively large.

Several cements representing cities such as Shenyang, Changchun, and Harbin, No. 42.5, now the cement price in Shenyang is around 425 yuan/ton, up 25% year-on-year and up 32% from the beginning of the year; the price of 42.5 cement in the Changchun area has reached 485 yuan, a year-on-year increase of 29% and a 56% increase from the beginning of the year; Harbin's price is now the highest in the three provinces of Northeast China, reaching 500 yuan/ton, up 25% year-on-year, and up 47.1% from the beginning of the year. It can be said that the sharp rise in prices is the main reason for the sharp increase in the gross margin of the cement industry in the third quarter of the Northeast China.

In terms of fundamentals, Liaoning and Jilin were affected by overcapacity in previous years. The industry boom has been in a sluggish state. The price has remained at more than 200 yuan and fluctuates between 250 and 300 yuan. The industry sometimes faces losses in the entire industry. At the time, it may be a meager profit, resulting in less production of new production lines in the last two years. Due to better demand this year, the pressure of supply and demand eased, and the industrial synergy between these large regional enterprises kept pace with the situation, resulting in a rapid increase in cement prices in Northeast China. This is the third quarter gross profit margin in the Northeast One of the fundamental reasons for promotion.

Moderator: Affected by the continuous decline in real estate prices, the recent performance of the cement sector has been unfavorable. Today, the market experienced a drop, and the cement sector was also listed at the top of the list of gains. The current decline rate exceeds 2.76%. . Some people think that real estate trending stocks are still a market concern and may lead to a weaker cement demand and prices in the first quarter of 2012. How do you see this?

Yu Pengcheng: In the fourth quarter of the quarter, with the relief of capital projects represented by railway projects, the demand may show some improvement, and the fourth quarter is itself the largest peak season in the whole year. From the demand side, there are still prices. A certain amount of support.

If we look forward to the next year (2012), we may be a little cautious, mainly based on the impact of real estate control policies. From the fundamental research we have done, the current year-on-year growth rate of real estate start-up area and sales area is significant. Divorced, and this situation also occurred in February of 2008 and May of 2010. Once this situation arises, we can also find that the area of ​​new real estate starts in the month has a year-on-year growth rate of 6 to 8 months. It is basically a sharp decline or even a negative growth. Therefore, we have judged that from the current year-on-year growth rate of new housing start-ups in the current month, there has been a clear downward trend, which fell from 9.9 in September to 2.2% in October. Therefore, within the next six months, real estate may start new. The area will fall into a negative growth range.

Since the year-on-year growth rate of new real estate for start-ups is a leading indicator of the demand of the cement industry, it can be judged that the overall demand of the cement industry in the future is not very optimistic, and if there is no support for the demand side, the possibility of prices falling is also greater. At the same time, cement prices are still at a high level in the first half of this year. Coupled with the impact of such a high base, next year's decline in cement prices should be relatively certain.